Chart of the Week: Tax Revenues Devoured by Entitlements

The looming unsustainability of the big three entitlement spending programs—Medicare, Medicaid, and Social Security—is not inevitable, but in order to avoid the catastrophic effects of consuming every bit of tax revenue in just one generation, reform is a necessity.

Take a look at Medicare, the largest portion of the projected entitlement expense by the year 2045.

Here’s the projected outlook of spending on Medicare, Medicaid, and Social Security by 2045, when entitlement spending matches tax revenues, from Heritage’s Federal Budget in Pictures, using Congressional Budget Office figures:

The need for Medicare reform in light of the impending crisis going forward has elicited the acknowledgement of all sides, which Heritage’s Amy Payne highlighted in a recent Morning Bell:

Quick quiz: Who said this about Medicare? “With an aging population and rising health care costs, we are spending too fast to sustain the program. And if we don’t gradually reform the system while protecting current beneficiaries, it won’t be there when future retirees need it. We have to reform Medicare to strengthen it.”

Obamacare has already ended Medicare “as we know it.” Obamacare will not preserve Medicare or even prevent the program’s descent into unsustainability. Instead, as Heritage’s Alyene Senger reported, the Congressional Budget Office adjusted its estimate of Medicare cuts to $716 billion over 10 years, in a raid on Medicare’s core services:

According to the CBO, the payment cuts in Medicare include:

A $260 billion payment cut for hospital services.
A $39 billion payment cut for skilled nursing services.
A $17 billion payment cut for hospice services.
A $66 billion payment cut for home health services.
A $33 billion payment cut for all other services.
A $156 billion cut in payment rates in Medicare Advantage (MA); $156 billion is before considering interactions with other provisions. The House Ways and Means Committee was able to include interactions with other provisions, estimating the cuts to MA to be even higher, coming in at $308 billion.
$56 billion in cuts for disproportionate share hospital (DSH) payments.* DSH payments go to hospitals that serve a large number of low-income patients.
$114 billion in other provisions pertaining to Medicare, Medicaid, and CHIP* (does not include coverage-related provisions).

Far from protecting seniors and preventing the program’s insolvency, the Medicare raid cuts services for seniors and hastens Medicare’s impact on the federal credit card, as it makes up the largest portion of the projected entitlement spending by 2045.

Only true reform—particularly, converting Medicare to a “premium support” system—could produce the adjustment necessary to keep Medicare from careening out of control.

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Can we even have a truly bipartisan, non-demagogic discussion of this subject? The Democrats refuse to do so, immediately labeling anyone suggesting reasonable reform as an extremist, ready to push grandma off a cliff.

How come no one asks -how Obama is going to save anything in his control when he denies what's in his control and takes extreme amounts from here to fund unconstitutional obamacare? How come no one asks Obama to explain his allegations against his opposition who does have sustainable ideas where Obama refuses to acknowledge sustainability?

According to the various charts I've seen so far that illustrate our spending on various programs as a percenatge of total spending and cross reference that with the annual deficits we're running it would seem that this sceanario has arrived about 43 years early!

It seems that Social Security, Medicare, Medicaid, and other mandatory spending are eating up about $2 trillion a year and when added to the annual cost of interest on the debt which is also skyrocketing the total approaches $2.3 trillion. That only leave about $200-$300 billion to pay for EVERYTHING else if we wanted to balance the budget !! Can't be done without borrowing and piling up even more deficits.

In 2010 the total of mandatory expenditures plus interest on the debt totaled 61% of total spending! That left only 39% for all other spending and we were having to borrow 40% of every dollar we spent so you do the math. A their current rate of growth we can cut everyhting but the mandatory payments and still not balance the budget.

Thank you RDM. You did the math……I only felt it in my gut what you laid out in facts. This country and more specifically our elected officials need to do the"right thing." Their intransigence is frustrating. We deserve better from those who profess to represent us.

Converting Medicare to a premium support system will provide some benefits to everyone. The Affordable Care Act will provide benefits to only those who can find providers that will accept a much lower reimbursement than other insurers provide. Good luck with that. It is like telling your grandchildren that you will buy them ice cream cones if they can find someone to sell them for a quarter. The Affordable Care Act is a red herring!

Social Security is NOT an entitlement program. It was paid for involuntarily by the people and stolen by government reps for use by the government. Now the government must fulfill its obligation to repay the people.

Actually no, there is no legal, and really no moral, obligation to repay the "contributors". You hear a lot of bilge about a contract between generations and about promises made. There is no "contract" and the people expected to make good the promises never made them. It's time to end these entitlements, including SS, and let the chips fall where they may.

I would argue that Medicaid is not an entitlement program. It's recipients paid nothing into it, and eligiblity is not determined by any "contract" between the recipients and the government.

I also note that Social Security benefits are not determined solely by the amount paid in. Bottom level beneficiaries (including me) get a lot more than they ever paid in, including interest, while top earners never even get as much as they paid in- bit of wealth redistribution there.

I don't necessarily object to some of that extra for the folks on the bottom (fair disclosure, I'm in the middle), but the article is simply stating the truth, we do not have the money and cannot reasonably sustain the current level of these payments. We have promised more than we can reasonably, or even unreasonably, ever deliver. I believe we must keep those promises for those who can no longer change their circumstances, but we must change the promises for those who can still make provision for their own futures. If we do not , we will find that we cannot keep those promises for anyone.

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